Agricultural policy during the Structural Adjustment Programme

Nearly two decades following the overthrow of Nkrumah, Ghana’s economy suffered from political instability, marked by four military coups and significant economic decline (Ankomah and Konadu-Agymang, 2004). The performance of the agricultural sector – the mainstay of the economy – was in decline following weak farmer incentives and inefficient production delivery systems (Kusi, 1991). Productivity in all sectors of the economy, particularly the agricultural sector, was declining. Demonstrating this, cocoa production, which was a major source of foreign exchange earnings, collapsed. In addition, the country was hit by the worst drought in fifty years.

Furthermore, about one million Ghanaians were deported from Nigeria, which increased the demand for food and jobs, heightening the economic, political and social problems of the 1980s (Jedwab and Osei, 2012). At the same time, inflation rose to an astonishing level (hyperinflation), and the state was totally bankrupt (Jedwab and Osei, 2012). It was from here that in 1983 Ghana embarked on an Economic Recovery Programme, with the aim of reconstructing the economy.

The Economic Recovery Programme was a Structural Adjustment Programme (SAP) under the direction of the Work Bank and the IMF.

Prior to the adoption of the Structural Adjustment Programme, agricultural policies promoted price control, input and credit subsidies, obligatory credit allocation and state involvement in production, distribution and marketing (Brooks et al., 2007; Stryker, 1990). The proponents of the Economic Recovery Program – particularly the SAPs – including the IMF and World Bank, argued that state intervention in sectors of the economy, such as manufacturing and expansive social services programmes, was largely the cause of economic problems facing the country (Konadu-Agyemang, 2001). They argued, for example, that state intervention in the rural sector – which employs a majority of the rural poor – distorts prices of agriculture products, with outcomes that reduce market opportunities. The aim of the SAP was therefore to remove market distortions, which were preventing price mechanisms from allocating resources efficiently (Sowa, 1996). This involved deregulation of rural markets and liberalisation of import markets. Benhin and Barbier (2001) argue that agricultural programmes and projects instituted during the adjustment period were aimed at affecting the input and output markets. The input market policy, in particular, was aimed at affecting land, credit, fertiliser, seeds, machinery, human labour, and commodities used in farming. In addition, output market strategies were aimed at influencing output prices, producer

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prices, quantities of production, food distribution and trade. For instance, three phases of the economic reform programme were aimed at realigning producer price of cocoa, promoting export, and liberalising export and import markets. These liberalisation strategies effectively removed subsidies across all sectors of the economy, including the agricultural sector (Yaro et al., 2016).

Fertilisers and pesticides were no longer subsidised by government due to the privatisation of importation and sale of fertiliser and other agrochemicals. Government subsidies were removed on the basis that government intervention in the input market was considered as distorting prices and hindering private sector participation in the input market. In addition, almost all state-owned institutions in the agricultural sector were privatised, except the Ghana Cocoa Board (COCOBOD), which retained control over pricing and export of cocoa from Ghana, although private companies are certified to purchase cocoa beans from farmers. Government retains control over the cocoa sector, because the sector has historically been the major source of government revenue and therefore privatising export of cocoa would jeopardise government revenue (Vigneri and Kolavalli, 2018). Government increased the producer price of cocoa in order to increase cocoa production, a strategy that incentivised farmers to increase production of cocoa (Koning, 2002).

Related to this was the promotion of export crop diversification based on the logic that dependence on cocoa alone was precarious for the economy, given the volatility of the world commodity market (Teye and Torvikey, 2018).

From the policy strategies, it could be inferred that commercialisation, marketisation and privatisation were all tied to the neoliberal agricultural and trade narratives of the 1980s, aimed at liberalising the Ghanaian economy. International donors – IMF and World Bank – promoted the neoliberal narratives premised on liberalisation of the economy, although counter narratives, centered on the material consequences of SAPs and promoted by civil society and farmers, among others, were ignored (Teye and Torvikey, 2018). The adoption of SAPs was on the premise that the government of Ghana urgently needed to salvage the deteriorating economy, with the IMF and World Bank prescribing the above neoliberal reforms as conditions for loans to support the economy (Teye and Torvikey, 2018).

The neoliberal economic adjustment strategies of the 1980s were purported to drive poverty reduction and economic growth, however they brought hardship to Ghanaians, particularly farmers. Overall, a number of macroeconomic indicators, including inflation, balance of payments,

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industry capacity and foreign reserves, each improved during the adjusting period (Hutchful, 2002;

Konadu-Aggyemang, 2001). However, critics argue these national economic indicators did not necessarily translate into improved well-being for Ghanaians. Critics of SAPs also challenged the view of the World Bank that development should be understood as improvement in national economic growth, measured by GDP, given that despite overall improvements in the economy, poverty was higher after SAPs (Konadu-Aggyemang, 2001). In addition, the removal of agriculture input subsidies rapidly increased prices of inputs, with outcomes that discouraged the use of inputs (including fertiliser and merchanisation) (Houssou et al., 2016). These impacts, alongside high costs for social services, including healthcare and education, each served to increase the cost of living for Ghanaians, especially rural dwellers, who rely largely on agriculture for subsistence.

Bell (2012) assessed the impacts of SAPs on poor countries and argued that because SAPs promote export cropping, investors purchase farmland to produce export crops for the newly liberalised export trade. These activities drive the displacement of poor farmers – a capital accumulation by dispossession (Harvey, 2005) – who move onto marginal lands, often causing deforestation and land degradation. With the conversion of marginal land into food production, productivity declines, with impacts that leave poor or adjusting countries increasingly dependent on food imports to meet their local food needs. Focusing on export crops, SAPs have ignored food production and worsened the predicament of smallholder farmers (Teye and Torvikey, 2018). As more people acquired land for the production of export crops, landowners took advantage of that to increase rent. Poor rural farmers, migrant farmers and women became the losers, as they could not afford to buy land for agricultural production (Sawyer, 1988).

Food imports also increased in the 1980s, with liberalisation policies preventing government from protecting local food production from foreign competition. For instance, the government of Ghana imported maize and rice during the 1980s, and for rice in particular, since the 1990s its imports and consumption increased, displacing traditional staple food (Amanor and Pabi, 2007). Currently, 70% of the rice requirement in Ghana is imported from US, Vietnam, China and Thailand (GAIN, 2012a).

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In sum, Structural Adjustment not only impoverished rural and urban dwellers, driving their dependence upon imported food, it also established the basis for a liberal economy, the tenets of which have shaped policies, particularly in the agricultural sector (see Chapter Six). One of the greatest policy challenges remains in the context of this legacy: how to reconcile the tenets of Structural Adjustment and poverty alleviation. Despite the failure of neoliberal Structural Adjustment to alleviate poverty in Ghana, development policies continue to be shaped by the tenets of neoliberal development.